De Beers to Sell 26% Stake in DBCM for $563.57 Million

De Beers recently announced that it is selling a 26 percent stake in De Beers Consolidated Mines (DBCM) to a black-owned firm for about R3.8 billion ($567.57 million). The new company, Ponahalo, will be owned by DBCM employees and pensioners and headed by Manne Dipico, former premier of the Northern Cape Province.

In a public announcement, attended by South Africa’s Minister of Minerals and Energy Lindiwe Hendricks and Anglo American Chairman Tony Trahar, De Beers and DBCM Chairman Nicky Oppenheimer said it was a historic moment in the history of the company.

The upfront sale of the 26 percent stake, five years ahead of the 2010 deadline set by the government, was done because De Beers believes that when doing something it should be done properly, Oppenheimer said.

Ownership of Ponahalo will be 50 percent by De Beers South African based employees and pensioners and 50 percent by a consortium of business and broad based groupings, namely Ponahalo Investment Holdings. Ponahalo Investment Holdings includes business individuals (both men and women), and trusts representing disadvantaged women, people with disabilities and mining area communities.

Ponahalo’s Chairman will be appointed Deputy Chairman of DBCM and serve on DBCM’s Executive Committee. Two other Ponahalo nominees will be appointed to DBCM’s Board of Directors. Ponahalo will utilize $1.48 million (escalating at 5 percent per annum) of its dividend income each year, or more than R100 million ($14.8 million) in aggregate over the first 10 years, to make other investments in South Africa.

Ponahalo will also set aside R5 million ($741,000) each year, or R50 million in aggregate over the first 10 years, which will flow directly to trusts for the benefit of disadvantaged women, people with disabilities and communities around DBCM’s mines. Over the first 10 years, the balance of Ponahalo’s dividend income will be used for debt service. De Beers says it will provide “meaningful financial facilitation to ensure a robust and sustainable transaction.”